Pep Boys 2014 Annual Report Download - page 29

$5.0 million and $5.3 million in fiscal 2014 and 2013, respectively, gross margin from service revenue
increased by 400 basis points to 2.3% in fiscal 2014 from a loss of 1.7% in fiscal 2013. The increase in
service revenue gross margin was primarily due to the leveraging effect of higher sales on the fixed
component of payroll and related costs.
Selling, general and administrative expenses as a percentage of total revenues increased to 23.2%
for fiscal year 2014 from 22.5% for fiscal 2013. Selling, general and administrative expenses for fiscal
2014 increased $19.3 million, or 4.2%, to $484.2 million from $464.9 million for fiscal 2013 primarily
due to, increased media costs of $5.6 million, higher severance expense of $2.3 million, higher legal
expense of $4.6 million, higher general liability and automotive claims of $1.8 million and higher store
selling expense due to store growth of $2.8 million.
In the fourth quarter of fiscal 2014, we recorded a $23.9 million goodwill impairment charge (see
Note 12 to the Consolidated Financial Statements).
In the fourth quarter of 2014, we sold three stores, which resulted in a $14.0 million net gain from
disposition of assets over the prior year.
Interest expense for fiscal 2014 was $13.9 million, a decrease of $0.9 million from $14.8 million
reported for fiscal 2013.
Our income tax benefit for fiscal 2014 was $4.6 million, or an effective rate of 14.5%, as compared
to an expense of $2.2 million, or an effective rate of 24.1%, for fiscal 2013. The decrease in the
effective tax rate was primarily attributable to the mix of pre-tax (loss) earnings within certain
jurisdictions, the impact of the non-deductible portion of the goodwill impairment charge, permanent
tax differences in relation to pre-tax (loss) earnings and the effect of discrete items recorded in each
year.
As a result of the foregoing, we had a net loss of $27.3 million for fiscal 2014 as compared to net
earnings of $6.9 million for fiscal 2013. Our diluted loss per share was $0.51 as compared to earnings
per share of $0.13 in the prior year period.
Fiscal 2013 vs. Fiscal 2012
Total revenue for fiscal 2013 decreased by $24.2 million, or 1.2%, to $2,066.6 million from
$2,090.7 million for fiscal 2012. Excluding the fifty-third week in 2012, total revenue increased by
$11.9 million, or 0.6%, while comparable sales decreased 1.3%. The decrease in comparable store sales
was comprised of a 1.6% comparable service revenue increase offset by a 2.1% comparable
merchandise sales decline. The decrease in comparable merchandise sales was primarily due to lower
tires, oil and refrigerant sales. While our total revenues are favorably impacted by the opening of new
stores, a new store is not added to our comparable store sales until it reaches its 13th month of
operation.
Our total online sales are currently an immaterial portion of our total sales and comparable store
sales. Customer online purchases that are picked up at our stores are included in our comparable store
sales calculation. Customer online purchases that are delivered to customers’ homes are not included in
our comparable store sales.
Total merchandise sales decreased 2.1%, or $35.3 million, to $1,608.7 million for fiscal 2013,
compared to $1,643.9 million for fiscal 2012. Excluding the fifty-third week in 2012, total merchandise
sales declined 0.5%, or $7.6 million, while comparable merchandise sales decreased by 2.1%, or
$34.1 million. Our non-comparable stores contributed an additional $26.5 million of merchandise
revenue in fiscal 2013. The decrease in comparable store merchandise sales was driven primarily by
lower tire, oil and refrigerant sales.
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